Working Paper: CEPR ID: DP10574
Authors: Carsten Eckel; Michael Irlacher
Abstract: We show that the labor market effects of product line relocations within multi-product firms differ significantly from the relocation of production tasks within single-product firms. By incorporating offshoring of labor-intensive goods in a model with multi-product firms, and exploring its implications in partial and general equilibrium, we identify the cannibalization effect of offshoring as an important transmission mechanism within multi-product firms and show that this effect hits domestic labor demand in addition to the well-known relocation effect. Furthermore, we contribute to the growing literature on multi-product firms and trade by showing that lower offshoring costs tend to increase the range of products produced.
Keywords: Cannibalization Effect; Efficiency-Seeking Offshoring; General Oligopolistic Equilibrium; Product Range
JEL Codes: F12; F23; L23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| offshoring labor-intensive production lines (L23) | reduction in domestic labor demand (J29) |
| offshoring labor-intensive production lines (L23) | cannibalization effect (D16) |
| cannibalization effect (D16) | reduction in domestic labor demand (J29) |
| offshoring labor-intensive production lines (L23) | relocation effect (J62) |
| relocation effect (J62) | reduction in domestic labor demand (J29) |